Best of the Week
Most Popular
1. Next Financial Crisis Is Already Here! John Lewis 99% Profits CRASH - Retail Sector Collapse - Nadeem_Walayat
2.Why Is Apple Giving This Tiny Stock A $900 Million Opportunity? - James Burgess
3.Gold Price Trend Analysis - - Nadeem_Walayatt
4.The Beginning of the End of the Dollar - Richard_Mills
5.Stock Market Trend Forecast Update - - Nadeem_Walayat
6.Hindenburg Omen & Consumer Confidence: More Signs of Stock Market Trouble in 2019 - Troy_Bombardia
7.Precious Metals Sector: It’s 2013 All Over Again - P_Radomski_CFA
8.Central Banks Have Gone Rogue, Putting Us All at Risk - Ellen_Brown
9.Gold Stocks Forced Capitulation - Zeal_LLC
10.The Post Bubble Market Contraction Thesis Receives Validation - Plunger
Last 7 days
Tory BrExit Chaos Cripples UK Economy, Wrecks Housing Market Confidence - 15th Nov 18
Stocks Could End 2018 With A Dramatic Rally - 15th Nov 18
What Could Be the Last Nail in This Stock Bull Markets Coffin - 15th Nov 18
Defensive Stock Sectors Outperforming, Just Like During the Dot-com Bubble - 15th Nov 18
Buying Your First Home? Here’s How to Save Money - 15th Nov 18
US Economy Ten Points or Ten Miles to ‘Bridge Out’? - 14th Nov 18
US Stocks: Whither from Here? - 14th Nov 18
Know exactly when to Enter&Exit trades using this... - 14th Nov 18
Understanding the Benefits of Keeping a Trading Journal - 14th Nov 18
S&P 500 Below 2,800 Again, New Downtrend or Just Correction? - 13th Nov 18
Warning: Precious Metals’ Gold and Silver Prices are about to Collapse! - 13th Nov 18
Why the End of the Longest Crude Oil Bull Market Since 2008? - 13th Nov 18
Stock Market Counter-trend Rally Reaches .618 Retracement - 13th Nov 18
How to Create the Best Website Content and Generate Organic Traffic - 13th Nov 18
Why the Stock Market Will Pullback, Rally, and Roll Into a Bear Market - 13th Nov 18
Stock Markets Around the World are Crashing. What Not to Worry About? - 12th Nov 18
Cyclical Commodities Continue to Weaken, Gold Moves in Relation - 12th Nov 18
Olympus Tough TG-5 Camera Stuck or Dead Pixels, Rubbish Video Auto Focus - 12th Nov 18
5 Things That Precede Gold Price Major Bottoms - 12th Nov 18
Big US Stocks Q3 Fundamentals - 12th Nov 18
How "Free Money" Helped Create Sizzling Housing Market & REIT Gains - 12th Nov 18
One Direction More Likely for Bitcoin Price - 12th Nov 18
The Place of HSE Software in Today's Business - 12th Nov 18
Gold Asks: Are US Bonds Overvalued? - 11th Nov 18
Why the Stock Market Will Pullback Before Heading Higher - 11th Nov 18
GDX - Will you Buy This Hated Stock with Me? - 11th Nov 18
Christmas and Halloween LED Dynamic Projector Light Review - 11th Nov 18
Wall Street Veteran: Why I Don’t Lend to Family and Friends - 10th Nov 18
Stocks Breaking Higher, but Resistance Ahead - 10th Nov 18
Stock Market Was Supposed to “Crash Like 1987” - 10th Nov 18
SPX : The Incredibull Stock Market Plays On - 9th Nov 18
USD/CAD – The Moment of Truth Is Coming - 9th Nov 18
Is the Stock Market’s Rally “All Good To Go”? - 8th Nov 18
End in Sight for 'Unloved' Silver - 8th Nov 18
Outlook for Gold & Silver Precious Metals Sector is 'Positive' - 8th Nov 18
A Great Day for Metals as Platinum Price Breaks Out - 8th Nov 18
Future US Interest Rates, Financial Markets, and the FED - 8th Nov 18
Buying an Approved Used Land Rover From a Dealer - What You Need to Know! - 8th Nov 18

Market Oracle FREE Newsletter

Free Online Trading Session

Emerging Markets Infrastructure Spending Boom for Next Three Years

Stock-Markets / Emerging Markets Jul 09, 2008 - 06:01 AM GMT

By: Jason_Simpkins

Stock-Markets

Best Financial Markets Analysis ArticleMerrill Lynch & Co. Inc. ( MER ) has raised its annual infrastructure-spending estimate for emerging markets by 80%, as developing countries try to keep pace with fast-growing economies and large cash reserves, BusinessWeek reported.

Investment in infrastructure, which the firm sees as the long-term solution to inflation, will rise from $1.25 trillion to $2.25 trillion annually over the next three years. And China, the Middle East, and Russia will account for 70% of infrastructure spending. 


The report from Merrill Lynch pointed out that Xstrata PLC (OTC: XSRAY ) recently predicted emerging markets would spend $22 trillion on infrastructure in the next 10 years.

“That estimate is among the highest we've seen,” the report noted, “with an implied run rate of $6.6 trillion over the next three years.”

Estimated Infrastructure Spending For the Next Three Years

Region New Estimate Previous Estimate
China $725 Billion $400 Billion
Middle East $400 Billion $225 Billion
Brazil $225 Billion $100 Billion
Russia $325 Billion $195 Billion
India $240 Billion $110 Billion
Turkey $65 Billion $50 Billion
Source: Merrill Lynch, Money Morning Research

 

China and the Gulf states, each with enormous cash reserves from trade surpluses, will be the two leading infrastructure investors according to Merrill Lynch.

China's $78 Billion Reconstruction

Infrastructure spending in China hit the ground running in the past few years as the nation prepared to host the 2008 Summer Olympic Games. Beijing has already spent $40 billion on infrastructure, including a new airport terminal and subway lines, in preparation.

Unfortunately, the Olympic torch relay, which was meant to signify the country's readiness for the Games, paused from May 19 to May 21, to mourn those killed in the massive earthquake.

Now, Beijing will be footing the bill for another massive infrastructure push - this time to rebuild much of the country, which will cost an estimated $78 billion. Of course, Chinese infrastructure companies are up to the task and well prepared for a sharp rise in demand for their products and services.

It's a sad thing ,” Ma Chunji, the head of Sinotruk, the nation's top truck manufacturer told the International Herald Tribune . “But it will stimulate demand.”

“Beijing planned originally to readjust the speed of growth and compress the size of infrastructure projects, and that would have affected us,” he added. “Now we face a positive.”

Obvious beneficiaries of the rebuilding effort include vehicle makers like Sinotruk, as well as cement and steel producers.  In fact, Chinese industrial-production output rose 16% in May from a year earlier after gaining 15.7% in April, according to the nation's statistics bureau.

Baosteel Group Corp. , China's leading steel producer was a big reason for the increase as it stepped up production of many specialized steel products for the rebuilding effort.

Baosteel finished its second batch of medical stainless steel on June 30th . So far, the company has produced a total of 33 metric tons of the specialized steel to be used in quake relief work and sent to relevant medical apparatus plants.  Baosteel will also construct 10,000 square meters of buildings of color coated steel sheet for the city of Dujiangyan .

Beijing may also use the reconstruction effort as a chance to upgrade many of the country's antiquated transportation and communications systems.

“Traditional communication systems have been seriously damaged in the earthquake, making us rethink the whole communications system,” Fok Tung Ling, chairman of the wireless equipment vendor Comba told the International Herald Tribune .

Xi Guohua, a senior industry regulator told the IHT that authorities are working on “combining the sky and earth,” building a wireless system with optical cable.

Also, a railway-building boom, similar to the one that took place in the United States in the 19th century, could arrive sooner rather than later.

That's welcomed news to China Railway Group Ltd. and China Railway Construction Corp Ltd. , which will be among the biggest winners, according to Barron's .

Total investment in China's railway sector is soon expected to reach $200 billion , with both companies well positioned for a big piece of the new business, as they control approximately 85% of China's railway infrastructure market, Barron's said.

Middle East Oil Oasis

In 2007, the six nations of the Gulf Cooperation Council - Saudi Arabia, Kuwait, Bahrain, Omar, Qatar and the United Arab Emirates - earned $381 billion from oil exports and that was before oil prices rocketed up to over $145 per barrel before dropping back to its current level of $135 per barrel.

The cumulative earnings of the Gulf States will reach into the trillions if oil remains over $100 for several more years.

There's already an estimated $2.4 trillion in construction projects either underway or under development in GCC countries. And $1.4 trillion of that is earmarked for projects in civil construction.

Saudi Arabia, the world's largest oil producer and exporter has put its petrodollars to work, embarking on a massive $460 billion construction program. According to the National Commercial Bank (NCB), Saudi Arabia has formally announced 576 separate projects, 70% of which are already well underway.

“These investments are inspired by the Kingdom's ambitious strategy to tackle the country's most chronic social and economic challenges; rising unemployment and the need to create more than five million new jobs by the year 2020, declining living standards and overall wealth of the population, and the unbalanced regional economic development,” the NCB told Emirates Business .

In fact, as Emirates Business reported, Saudi Arabia has opted to curb steel exports to its Gulf neighbors after soaring demand resulted in shortages that left the nation unable to complete its own slate of massive building projects.

Meanwhile, Dubai is funneling $82 billion into an aerospace project that includes plans for the world's largest airport . And that's just part of the $300 billion in construction-and-development projects currently underway in Dubai.

Some other gargantuan infrastructure projects in the region include:

  • King Abdullah Economic City, Saudi Arabia: $120 billion. The leading firm is Dubai-based developer Emaar.
  • Silk City Project, Kuwait: $86 billion. The leading firm is Tamdeen Real Estate.
  • Dubailand, U.A.E.: $60 billion. The leading firm is Tatweer.
  • Al-Zorah, a $60 billion coastal city in the emirate of Ajman . The leading firm is Solidere International.

All of this money will eventually trickle down to the purveyors of raw material used in construction. That puts Rio Tinto PLC ( RTP ), BHP Billiton Ltd. ( BHP ) in an enviable position.

Both companies have secured a 97% increase in price they will be paid for their iron ore. Nippon Steel Corp. , the world's second-biggest steelmaker, recently accepted a record increase in iron ore prices from BHP that matched a doubling of prices Rio Tinto and Baosteel agreed to last month.

Their proximity to Asian markets also makes BHP and Rio a strong play for the burgeoning Chinese market.  China - which is both the world's largest producer and consumer of steel - imported 383 million metric tons of iron ore in 2007, an increase of 56.8 million tons, or 17.4%, from the previous year, according to the China Iron and Steel Association.

News and Related Story Links:

By Jason Simpkins
Associate Editor

Money Morning/The Money Map Report

©2008 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investment advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or 72 hours after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Jason Simpkins Archive

© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

Ayten Ergin
14 Jul 08, 11:29
Steel prices

Hi

I would like to know where I can gather data on the estimated steel prices for the next 3 years?

Thank you

Regards

Ayten


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules